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A Healthy Amount of Separation

Updated: Sep 19, 2022

When your truck doubles as a living and a work space, the lines between business purchases and personal expenses can become blurry. Keeping business and personal accounts separate to avoid commingling of funds is important when you have a corporation. It is one of the ways to ensure your corporation can continue to act as a divide or veil between your business assets and your personal assets.

So what is “commingling”? Commingling is when business owners use business funds as their own. Some ways people commingle funds are:

  • Depositing checks made payable to your business into your personal bank account

  • Making withdrawals from your business checking account to pay obvious personal expenses without the proper documentation

  • Using the same bank account for your business and personal needs

  • Writing business checks for personal expenses

  • Moving money back and forth between your business and personal accounts without documentation

Why is it so important to keep business and personal funds in separate accounts?

Asset Protection

One of the primary reasons people form an LLC or S Corp is to take advantage of tax savings. However, another reason is to achieve personal asset protection. When you form an LLC or S Corp make sure you are keeping business and personal finances separate. This is because in the instance of financial hardship or legal action against your corporation, the courts may deem it appropriate to “pierce your company’s veil” and hold you personally liable for the company’s debts or lawsuits.

There are several factors the courts investigate when deciding whether to pierce a company’s veil, but one of the key factors is the presence of commingled funds. Therefore, if you treat your business’s money the same as your own, you risk the exposure of your personal assets. To avoid the risk of personal liability, comply with the rules governing the maintenance of a corporation (such as keeping proper meeting minutes and holding annual meetings) and maintain a separate business account.


Mixing business and personal funds can also make accounting for your company difficult - or worse - inaccurate. Accounting is more than just doing your taxes. Accounting tells you how your business is performing. Mixing business and personal purchases in the same accounts make it difficult to have a clear view of your business’ cash flow. Without a clear view of your business, you aren’t able to properly manage your funds and see areas where you can improve.

When record keeping is sloppy, you can’t be sure which parts of your business are doing well and which parts have places to reduce costs. That’s why it’s so important to implement business only accounts for cash and for credit card purchases.


In addition to proper accounting, keeping your tax records and receipts separate and well-documented can ensure you’re receiving every legitimate tax deduction while protecting yourself from an audit. As the old saying goes, “Keeping your books in order keeps the tax man from your door."

A few helpful tips on taxes:

  • You can’t deduct what you can’t document. If it’s unclear whether an expense is business or personal, make a concerted effort to document it right away so you don’t miss out on the deduction come tax season.

  • Most small business owners pay more than the law requires because they don’t have a separate system for keeping track of business expenses. Using helpful software or a trusted bookkeeper such as ATBS can ensure you’re not paying the IRS more than you should.

  • Whether you intend to do your taxes yourself or you intend to use a tax specialist, keeping your records and receipts separate will save valuable time sorting and will ensure a deduction doesn’t get accidentally missed.


If your business gets audited, separate accounts will help keep things in order. If there’s a question about whether or not your venture really is a business, the IRS will check to see if you have a separate business checking account. If you’ve commingled business and personal funds, there’s a greater chance of mixing up transactions which will make for a more painful tax audit.

When you set up a business account make sure you understand the fine print, including the fees and balance requirements. Also, make sure you have the supporting documentation for any business deduction claimed from an expense. Make sure the documentation includes the amount, where and when it was made, and the business purpose, in case of a request from the IRS.

Business Credit

Banks won’t consider okaying a loan or providing credit to any person or entity that doesn’t have a credit history. This is why in the beginning; small business owners typically rely on their personal credit and assets to fund their business. However, opening a business bank account and credit card is an important step that will build your business’ credit profile which will allow you to stop relying on your personal credit profile.

Using a business credit card strictly for business expenses helps to increase your business credit card limit. This will become critical when it’s time to make larger business purchases down the road because you will benefit from lower interest rates. Also, in some cases the interest paid on a business credit card is deductible as a business expense.

As an owner-operator, it’s important to maintain the professionalism of your business. Keep business finances separate from your personal finances to make sure your business is profitable, running smoothly, and has an image of professionalism. Taking your finances seriously will be apparent to carriers and can increase your business.

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